The links between public debt and employment rate for euro-zone countries

Can a low employment rate lead to a high public debt ratio? One could think so, as a low employment rate leads to: Low potential GDP, and there fore low tax revenues; Increased primary inequality (before redistribution), which leads to large-scale redistributive policies (generous social welfare, support to low incomes, etc.) that can lead to a chronic fiscal deficit. When comparing the euro-zone countries, we see that low employment rates and high public debt ratios are closely associated. It is clear that the dynamics where a low employment rate is offset by a continuous fiscal deficit cannot be extended in the long term.